It is Labor Day weekend, 2011, but labor has nothing to celebrate. The jobs that once gave American workers a stake in capitalism
have left and gone away. Corporations in pursuit of near-term profits have
moved labor's jobs to China, India, Indonesia, Taiwan, South Korea and Eastern Europe.
Labor arbitrage, that is, the substitution of foreign labor that is paid less than its productivity for American labor, has enriched Wall Street, shareholders and corporate CEOs, but it has devastated
American employment, household incomes, tax base, and the outlook for the US economy.
This Labor Day week-end's job report, announced by the Bureau of Labor Statistics (BLS) on Friday, September 2, says zero net new
jobs were created in August, a number 250,000 less than the amount of monthly job creation necessary to make progress in reducing America's high rate of unemployment.
The zero figure is actually an optimistic number. As
John Williams has made
, problems with the BLS's seasonal adjustments and "birth-death"
model during the prolonged downturn that began in December
2007 result in the BLS over-estimating new jobs and underestimating lost
Seasonal adjustments and the "birth-death" model
were designed with a growing economy in mind and result in miscounts during
downturns. For example, the "birth-death" model estimates new jobs that are
created from new start-up companies that are not yet reporting, and it estimates
the job losses from companies that have gone out of business. In a growing
economy, start-ups exceed jobs losses, but the situation reverses during
downturns or during periods of sub-normal job growth. For the past 44
months, the "birth-death" model has overestimated the number of new jobs
created. When the annual revisions are made to the job reports, the excess jobs
are taken out, but it is seldom headline news.
The reason that nearly four years of economic
stimulus, consisting of large federal budget deficits and near zero interest
rates, hasn't revived the economy is that the jobs that Americans once had have
been moved offshore. Stimulus cannot put Americans back to work in jobs that
have been given to foreign countries.
Post-World War II Keynesian economists, such as Paul
Krugman and Robert Reich, think that if the federal government would add more
stimulus by enlarging the already massive federal deficit, new jobs would
somehow be created to take the place of those that have left. This is a
delusion. Not only have the supply chains necessary to support US economic
activity been disrupted and broken by offshoring, but also the same
incentive -- excess supplies of foreign labor that produces more value than it is
paid -- that sent jobs abroad is still operative.
In a word, the US economy has been
de-industrializing, moving from a developed to an underdeveloped economy, for
the past two decades. It has been the case for many years that when the US
economy manages to eke out new jobs, they are in non-tradable domestic services,
such as health care and social assistance, waitresses and bar tenders, retail
clerks. Non-tradable employment consists of jobs that do not produce goods and
services that could be exported to reduce the large US trade
The long-term deterioration in the US economy has
been covered up by "reforming" the official measures of unemployment and
inflation. The U3 measure of unemployment, the current 9.1% unemployment rate,
only measures unemployment among those who are actively seeking a job. Those who
have become discouraged by the inability to find a job and have ceased looking
are not counted as being among the unemployed, and the U3 measure makes no adjustment for those who are forced into part-time jobs because there is no full-time employment.
The government knows that the U3 "headline"
unemployment rate is seriously understated and provides a broader measure known
as U6. This measure, which is seldom reported by the financial media, includes
short-term discouraged workers (those who have not looked for jobs for six
months or less) and an adjustment for those who wish full time employment but can only find part time work. Currently, this measure of unemployment stands at
In 1994, the Clinton "progressive" administration
defined long-term discouraged workers out of existence. Consequently, no
official unemployment rate includes long-term (more than six months) discouraged
workers as unemployed. John Williams estimates this number and adds it to the U6 measure to produce a current rate
of US unemployment of 22.7%, an
unemployment rate 2.5 times higher than the official rate.
Similar understatement exists in the measure of
inflation known as the Consumer Price Index. In order to reduce cost-of-living
adjustments to Social Security checks and to hold down other inflation
adjustments, the "progressive" Clinton administration accepted the Boskin
Commission's recommendation to introduce substitution into what had been a
fixed, weighted, basket of goods used to measure the cost of a constant standard
of living. In the new "reformed" measure, if the price of an item increases, say
New York strip steak, the index assumes that consumers switch to a less
expensive cut, such as round steak. Thus, the price increase doesn't show up in
Consumers, or a number of them, do tend to behave in
this way. However, since the basket of goods comprising the CPI is no longer
constant, but changes with price changes, the CPI has become a variable measure
of the cost of living that reduces the inflation rate by measuring a lower
standard of living.
John Williams estimates the CPI according to the
previous official methodology that used a fixed basket of goods. He finds the
rate of inflation to be much higher than is reported
by the substitution-based
The understatement of inflation serves to boost real
Gross Domestic Product growth. In order to compare how much larger (or smaller)
the economy is this year compared to last year, the GDP figure has to be
adjusted for inflation. If the economy grew 5% in nominal terms and inflation
was 3%, then GDP grew 2% in real terms, that is, real goods and services, as
opposed to mere price rises, increased 2% over the year.
When John Williams adjusts US GDP
with the former or traditional measure of inflation, he finds
that there has been no growth in real GDP for several years. In other words,
during the period of "economic recovery" the economy has actually been
American economic decline began with offshoring
during the Clinton administration. Instead of addressing this threat, the
Clinton administration launched the neoconservative program of American Empire
with American and NATO naked aggression against Serbia, sending the Serbian
leader off to be tried as a war criminal for resisting the dissolution of his
The Bush/Cheney regime elevated the pursuit of
American Empire under cover of "the war on terror." Based entirely on lies and
falsified intelligence, Bush/Cheney launched wars against the Taliban, who were
unifying Afghanistan, and against Saddam Hussein in Iraq.
In the 1980s Hussein was used by Washington to
launch a war against the revolutionary government in Iran that had overthrown
the American puppet government, headed by the Shah of Iran. Ever since
Washington lost its puppet rule over the Iranians, Washington has refused
diplomatic relations with Iran. In the place of diplomatic relations, Washington
demonizes Iran in order to set the country up for another attack a la Serbia,
Afghanistan, Iraq, Libya, Somalia, Pakistan, and Yemen. Syria is
Saddam Hussein's service to Washington was
overlooked when it became more important to eliminate support for Hamas and
Hezbollah, two barriers to Israel's expansion in the Middle East, than to
maintain Washington's gratitude to an Iraqi pawn.
Despite unequivocal reports from arms inspectors
that Iraq had no weapons of mass destruction and most certainly had nothing
whatsoever to do with 9/11, top Bush/Cheney regime officials demonized Iraq as
the greatest threat to America. The imagery of mushroom clouds from nuclear
weapons was evoked, A war was launched entirely on false pretexts that destroyed
a country and left over one million Iraqis dead and four million displaced. What
Washington did to Iraq is what the Nazis were tried and executed for at the
Obama was elected in order to stop the illegal and
senseless wars. Instead, Obama both continued the wars in Iraq and Afghanistan
and expanded the wars into Libya, Pakistan, and Yemen. Since the deregulation of
the financial system under the Bush/Cheney regime and the "war on terror," the
entire economy of the US has been sacrificed for the benefit of the financial
sector and the military/security complex.
Labor Day is an anachronism. It should be renamed
Corporation Day or War Day to celebrate the success of Bush/Obama in eliminating
labor unions as a countervailing power to corporate power and the elevation of
War as the highest goal of the American state.